1 Acorn Construction (calendar-year-end C corporation) has had rapid expansion during the last half of the current yeardue to the housing market's recovery. The company has record income and would like to maximize its cost recoverydeduction for the current year. (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.)Note: Round your answer to the nearest whole dollar amount.Acorn provided you with the following information:Placed inServiceAugust 20October 17November 6AssetNew equipment and toolsUsed light-duty trucksUsed machineryTotalBasis$ 3,800,0002,000,0001,525,000$ 7,325,000The used assets had been contributed to the business by its owner in a tax-deferred transaction two years ago.a. What is Acorn's maximum cost recovery deduction in the current year?Answer is complete but not entirely correct.$947,917Maximum cost recovery deduction

Acorn's maximum cost recovery deduction for the current year is 947,917.The half year convention…

Answered: Acorn Construction (calendar-year-end C…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Owners of a new restaurant have found numerous costs associated with starting their business (see table). They financed the total of these costs with end-of-month payments through a loan from the bank at {E}compounded {F}, amortized over {G} years. 1. What is the size of the monthly payments required to settle this loan? 2. What is the principal balance outstanding on the loan after one year? 3. What is the size of the final payment? 4. Construct a partial amortization schedule for this loan.
You are analyzing a property that popped up on CREXI. Real estate taxes and management services cost 42,362 and 31,563, respectfully. Other expenses are 15,369. If your company’s required return is 10%, what must the average annual rent be over the next five years for you to purchase the property at $400,000 and obtain that 10%? Expenses grow at 2.5% per year. A. 189,500 B. 198,400 C. 201,300 D. 192,700 E. 209,500
2) Eugene H. Krabs borrowed $1.25 million for a second restaurant location of the Krusty Krab. How much must the restaurant receive each year in revenue, at a rate of return of 12% per year, for an 8-year payback period? Solve using (a) formula, (b) notation (tabulated factor), and (c) Excel function. (Section 2.2)
5. Fabulous Fabricators needs to decide how to allocate space in its production facility this year. It is considering the following contracts: a. What are the profitability indexes of the projects? b. What should Fabulous Fabricators do? **round to two decimal places**
Zenith Investment Company is considering the purchase of an office property. It has done an extensive market analysis and has estimated that based on current market supply or demand relationships, rents, and its estimate of operating expenses, annual NOI will be as follows: Year NOI 1 $ 1,030,000 2 1,030,000 3 1,030,000 4 1,210,000 5 1,260,000 6 1,310,000 7 1,349,000 8 1,389,170 A market that is currently oversupplied is expected to result in cash flows remaining flat for the next three years at $1,030,000. During years 4, 5, and 6, market rents are expected to be higher. It is further expected that beginning in year 7 and every year thereafter, NOI will tend to reflect a stable, balanced market and should grow at 3 percent per year indefinitely. Zenith believes that investors should earn a 12 percent return (r) on an investment of this kind.Required: a. Assuming that the investment is expected to produce NOI in years 1 to 8 and is expected to be owned for…
A company is thinking of investing in one of two potential new products for sale. The projections are as follows: Year Revenue/cost £ (Product A) Revenue/cost £ (Product B)0 (150,000) outlay (150,000) outlay 1 24,000 12,0002 24,000 25,3333 44,000 52,0004 84,000 63,333 1.Calculate the payback period for both products in years and months, not as a decimal. Please present answer to nearest half a month.
Suppose that your local coffee shop estimates earning the following revenue from customers for the next five years: 194, 301, 392, 501, 580. The business will face the following costs over the same five years to service the customers: 51, 39, 30, 19, 12. There is a one-time cost of $ 1,050 to acquire the customers. Assume a 100% retention rate of the customers and no discounting of future profit. What is the customer lifetime value over the five-year period? Round answer to the nearest whole number.
You are an employee of University Consultants, Ltd., and have been given the following assignment. You are to present an investment analysis of a new small residential income-producing property for sale to a potential investor. The asking price for the property is $1,250,000; rents are estimated at $200,000 during the first year and are expected to grow at 3percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A 70 percent loan can be obtained at 11 percent interest for 30 years. The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. a. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)?b. What is the first-year debt coverage ratio?c. What is the terminal capitalization rate?d. What is the NPV using a 14 percent discount rate? What does this mean?
Zenith Investment Company is considering the purchase of an office property. It has done an extensive market analysis and has estimated that based on current market supply/demand relationships, rents, and its estimate of operating expenses, annual NOI will be as follows:Year NOI1 $1,000,0002 1,000,0003 1,000,0004 1,200,0005 1,250,0006 1,300,0007 1,339,0008 1,379,170A market that is currently oversupplied is expected to result in cash flows remaining flat for the next three years at $1,000,000. During years 4, 5, and 6, market rents are expected to be higher. It is further expected that beginning in year 7 and every year thereafter, NOI will tend to reflecta stable, balanced market and…
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,360,000; rents are estimated at $174,080 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 6 percent interest for 30 years (total annual payments will be monthly payments × 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor’s expected before-tax internal rate of return on equity invested (BTIRR)? d.…
You have been asked to estimate the market value of an apartment complex that is producing $1,115,000 in annual net operating income. Four highly similar and competitive apartment properties within two blocks of the subject property have sold within that past three months. All four offer essentially the same amenities and services as the subject. All were open-market transactions with similar terms of sale. In short, all are equally valid substitutes for the subject property. The sale prices and estimated fırst year net operating incomes for the four properties were as follows: Comparable 1: Sales price $22,000,000; NOI $1,100,000 Comparable 2: Sales price $25,100,402; NOI $1,250,000 Comparable 3: Sales price $21,089,109; NOI $1,065,000 Comparable 4: Sales price $22,000,000; NOI $1,089,000 What is the indicated value of the subject property using direct capitalization, rounded to the nearest dollar?
You are an employee of University Consultants, Limited, and have been given the following assignment. You are to present an investment analysis of a small retail income-producing property for sale to a potential investor. The asking price for the property is $1,280,000; rents are estimated at $163,840 during the first year and are expected to grow at 2.5 percent per year thereafter. Vacancies and collection losses are expected to be 10 percent of rents. Operating expenses will be 35 percent of effective gross income. A fully amortizing 70 percent loan can be obtained at 8 percent interest for 30 years (total annual payments will be monthly payments 12). The property is expected to appreciate in value at 3 percent per year and is expected to be owned for five years and then sold. Required: a. What is the first-year debt coverage ratio? b. What is the terminal capitalization rate? c. What is the investor's expected before-tax internal rate of return on equity invested (BTIRR)? d. What is…

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